Institutional Investors In 2016 Seek To 'Trust, But Verify' On Governance

The Forbes article, "Institutional Investors In 2016 Seek To 'Trust, But Verify' On Governance," features Russell Reynolds Associates' research, "Global and Regional Trends in Corporate Governance for 2016." The research identified the key trends in corporate governance that public companies will face in 2016. The article is excerpted below.

Russell Reynolds Associates, the global executive search firm, interviewed governance executives and experts at some of the world’s largest asset managers, pension funds, shareholder organizations, proxy advisory firms, and activist investors to learn what trends they see emerging for 2016. Its findings make for interesting reading.

“The Petrobras scandal in Brazil, Satyam and more recent incidents in India, Toshiba in Japan, and perhaps Volkswagen in Germany will have a substantial impact on corporate governance in those countries as legislators, regulators, and institutional shareholder​s demand more tools to promote accountability and transparency from companies and their boards of directors.” it says.

It expects boards in the United States in 2016 to face an increasing call for accountability and disclosure from all classes of investors.

“Investors are pushing to have boards designate one or two directors as point people who will engage with investors meaningfully and appropriately about the board’s role in strategy development, executive compensation, and CEO succession planning” it says.

Boards will also start to look for more investor-savvy directors, whether from the investment community or from the ranks of current and former CEOs and CFOs who have dealt with investors regularly, says the report.

When it comes to Europe, the response to the Volkswagen scandal is not yet clear, it suggests. However, questions have been raised regarding the independence and quality of non-executive board directors in Germany, which applies a dual board structure. The report expects the trend toward more active (and activist) shareholders across the European Union (EU) to continue.​

It points out too, that many institutional investors in Europe are more concerned about differential shareholder rights and protection for minority shareholders.

“Gender and minority diversity for boards will remain a major focus of governmental and voluntary action across the EU, and we expect to see many more women named to boards across Europe in 2016 as national laws take full effect” it says.